Will energy abundance destabilize world politics?

A standard take on how energy affects world politics is Tom Friedman’s "First Law of Petropolitics" — the belief that high energy prices cause energy exporters to act in more belligerent ways. What if the opposite is the case, however? The Atlantic’s Charles Mann has a long, winding cover story on the growth of non-traditional hydrocarbon energy reserves ...

A standard take on how energy affects world politics is Tom Friedman’s "First Law of Petropolitics" — the belief that high energy prices cause energy exporters to act in more belligerent ways. What if the opposite is the case, however?

The Atlantic’s Charles Mann has a long, winding cover story on the growth of non-traditional hydrocarbon energy reserves — shale gas, methane hydrate, and so forth — and what that could mean for world politics. The good parts version:

Shortfalls in oil revenues thus kick away the sole, unsteady support of the state—a cataclysmic event, especially if it happens suddenly. “Think of Saudi Arabia,” says Daron Acemoglu, the MIT economist and a co-author of Why Nations Fail. “How will the royal family contain both the mullahs and the unemployed youth without a slush fund?” And there is nowhere else to turn, because oil has withered all other industry, Dutch-disease-style. Similar questions could be asked of other petro-states in Africa, the Arab world, and central Asia. A methane-hydrate boom could lead to a southwest-to-northeast arc of instability stretching from Venezuela to Nigeria to Saudi Arabia to Kazakhstan to Siberia. It seems fair to say that if autocrats in these places were toppled, most Americans would not mourn. But it seems equally fair to say that they would not necessarily be enthusiastic about their replacements.

Augmenting the instability would be methane hydrate itself, much of which is inconveniently located in areas of disputed sovereignty. “Whenever you find something under the water, you get into struggles over who it belongs to,” says Terry Karl, a Stanford political scientist and the author of the classic The Paradox of Plenty: Oil Booms and Petro-States. Think of the Falkland Islands in the South Atlantic, she says, over which Britain and Argentina went to war 30 years ago and over which they are threatening to fight again. “One of the real reasons that they are such an issue is the belief that either oil or natural gas is offshore.” Methane-hydrate deposits run like crystalline bands through maritime flash points: the Arctic, and waters off West Africa and Southeast Asia.

In a working paper, Michael Ross and a colleague, Erik Voeten of Georgetown University, argue that the regular global flow of petroleum, the biggest commodity in world trade, is also a powerful stabilizing force. Nations dislike depending on international oil, but they play nice and obey the rules because they don’t want to be cut off. By contrast, countries with plenty of energy reserves feel free to throw their weight around. They are “less likely than other states to sign major treaties or join intergovernmental organizations; and they often defy global norms—on human rights, the expropriation of foreign companies, and the financing of foreign terrorism or rebellions.” The implication is sobering: an energy-independent planet would be a world of fractious, autonomous actors, none beholden to the others, with even less cooperation than exists today.

The fact that China and the U.S. both currently rely on oil imports may be an important stabilizing force as it creates a shared interest in stable global oil markets and thus in ensuring that the Oceans are navigable, the Middle East is relatively stable, and that rules and norms whose violations could trigger instability are obeyed. Energy independence has long been thought to free U.S. foreign policy from undesirable constraints. But would the world be more stable if the U.S. had fewer constraints on how it exercises its foreign policy?

Mr Donilon said increased US and global gas production could break the link between the gas and more expensive oil prices and “weaken control by traditional dominant natural gas suppliers”.

The White House is also promoting gas as an alternative fuel to oil and coal as a way to reduce greenhouse emissions.

All of this has Walter Russell Mead a bit giddy, but let’s go back to Mann and Voeten’s point. Assuming that the extrapolations pan out — and it’s worth remembering that five years ago those projections looked very different — will declining energy prices trigger an arc of instability?

Color me a bit skeptical. First, energy is hardly the only resource that imbricates the great powers with the rest of the global economy. The global value chain does that on its own quite nicely, thank you very much, and a glance at the new Trade in Value Added data makes that clear.

Second, if Donilon’s speech was any indication of what new energy reserves would mean for U.S. foreign policy, I’d say retrenchment was not in the cards:

[R]educed energy imports do not mean the United States can or should disengage from the Middle East or the world. Global energy markets are part of a deeply interdependent world economy. The United States continues to have an enduring interest in stable supplies of energy and the free flow of commerce everywhere.

We have a set of enduring national security interests in the Middle East, including our unshakeable commitment to Israel’s security; our global nonproliferation objectives, including our commitment to prevent Iran from acquiring a nuclear weapon; our ongoing national interest in fighting terrorism that threatens our personnel, interests and our homeland; our strong national interest in pursuit of Middle East peace; our historic stabilizing role in protecting regional allies and partners and deterring aggression; and our interest in ensuring the democratic transitions in Yemen, North Africa and ultimately in Syria succeed.

Furthermore, as the FT article suggests, the United States sees the change in natural gas as a way to expand exports into Latin America. This doesn’t sound like a county that wants to retreat into autarky.

Third, there is one way in which reduced exports might make life easier for Middle Eastern governments — in the short term. That region has the highest level of energy intensity in the world, in no small part because g
as and oil are cheap and subsidized. Declining demand from elsewhere allows these governments to continue to provide cheap energy at home. From both a climate change perspective and an economic reform perspective, this ain’t good news. But it does augment political stability.

Finally, this is a slow-motion change in the global energy picture. North America has moved the furthest down the road on this revolution — Japan, China and Europe are just starting. So energy exporters have a fair degree of warning about what’s coming. This doesn’t mean that they’ll use the lead time properly. Still, one of the reasons for building up sovereign wealth funds and the like is to insure against the time when the energy fairy disappears.

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